Takeaway: Nothing to see here. Quarter was not good but expectations were low.

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance




  • WORSE:  EBITDA missed due primarily to Lake Charles and Waterloo.  Stock is up showing the "soft bigotry of low expectations"



  • SAME:  expects the $135 million facility to open by November 1, two months ahead of the initial schedule.  


  • SAME:  $15 million refurbishment of the main hotel tower in Lake Charles will be done by end of 2012.  In Black Hawk, $2 million of carpet, wall coverings, furniture and fixtures is expected to be complete by December 1, 2012.
  • PREVIOUSLY:  "We're currently renovating rooms in Lake Charles and Black Hawk, and adding a new Lone Wolf Bar in Waterloo "


  • SAME:  $5 million Lady Luck Casino rebranding will be done by the end of F2Q 2013 
  • PREVIOUSLY:  "Our Lady Luck rebrand at Vicksburg will be completed about the same time as the expected opening at Cape Girardeau, with upgrades that will enhance the customer experience, including a Lone Wolf bar and Otis and Henry's casual dining restaurant."


  • WORSE:  Heavy construction impacted F1Q results.  Performance should improve as construction subsides later in 2012
  • PREVIOUSLY:  "Vicksburg, we think we've turned the corner. We have made some improvements to the staff." 


  • SLIGHTLY WORSE:  Kansas City properties continue to face increased competitive pressures from the new competition
  • PREVIOUSLY:  [Kansas City Speedway opening promotional activity] "It hasn't got completely out of hand, but we don't necessarily expect anything long-term, but we have seen an uptick there.”

Weak Volume Beggars







US Treasuries have been something like a bucking bronco these days. Traditionally known as a safe haven, the 10-year is starting to trade like the S&P 500 with the VIX at 35. We’re seeing a big drop here as the yield heads straight down to the 1.62%. Yes, 1.62%. Remember when it was at 1.8% the other week? What gives? It snapped TRADE support of 1.65% like a hot knife through butter, is what gives. Today’s US GDP report may have a temporary effect on the yield but as things guess worse, the “safe haven” play will kick back in and that yield will drop like skydiver.




The weak volume beggars you may recognize. It may be the guy working the sales trading desk at the bulge bracket firm that used to be a top player in the mid-2000s but now has jack for products. It may be the broker-dealer who promised low rates when things were high-flying and the VIX was way up and is now snarling at his commission checks. Whoever it may be, realize that these are Old Wall, Weak Volume Beggars. The volume has dried up and it isn’t coming back to equities anytime soon. If your desk can’t realize and absorb that, then you’re going to have a problem on your hands.




Skip the Ashton Kutcher and Mila Kunis – we’re talking about monetary policy in the 1970s. Back then, Fed Chairman Arthur Burns was debauching the dollar just like Bernanke was, minus the pomp and circumstance on TV and in print. I guess the power of the Internet and media these days is just too much to resist. We’re doing the same thing we did back in the 1970s and look where it got us. At this point, it probably wouldn’t hurt to put the brakes on the QE and lowering rates further.






Cash:                  UP


U.S. Equities:   DOWN


Int'l Equities:   Flat   


Commodities: Flat


Fixed Income:  Flat


Int'l Currencies: Flat  








Nike’s challenges are well-telegraphed. But the reality is that its top line is extremely strong, and the Olympics has just given Nike all the ammo it needs to marry product with marketing and grow in the 10% range for the next 2 years. With margin pressures easing, and Cole Haan and Umbro soon to be divested, the model is getting more focused and profitable.

  • TAIL:      LONG            



The former Liz Claiborne (LIZ) is on the path to prosperity. There’s a fantastic growth story with FNP. The Kate Spade brand is growing at an almost unprecedented clip. Save for Juicy Couture, the company has brands performing strongly throughout its entire portfolio. We’re bullish on FNP for all three durations: TRADE, TREND and TAIL.

  • TAIL:      LONG



LVS finally reached and has maintained its 20% Macau gaming share, thanks to Sands Cotai Central (SCC). With SCC continuing to ramp up, we expect that level to hold and maybe, even improve. Macau sentiment has reached a yearly low but we see improvement ahead.

  • TAIL:      NEUTRAL







“FRENCH PM SAYS STABILIBITY MECHANISM 'MUST' BE IMPLEMENTED NOW. need some work on those desperation vibes” -@zerohedge




“It is better for civilization to be going down the drain than to be coming up it.”–Henry Allen




1.7%. The rate at which US GDP grew in the second quarter of 2012.



Fair or Foul?

This note was originally published at 8am on August 15, 2012 for Hedgeye subscribers.

“Fair is foul, and foul is fair.”

-Witches, Act 1, scene i


Today in 1057, Macbeth died. This global stock market, meanwhile, is quietly channeling its inner Shakespeare. Tragedy.


How else can you explain markets that are being cheered on to whoever will listen to the complete opposite of what the bull case was for stocks in March? What does it mean when markets go up for 6 straight weeks on no volume, and no one cares?


Fair economic news is now seen as a headwind for stocks and commodities, because the real bull case from here is foul.


Back to the Global Macro Grind


Foul? Indeed. If the bull case for America is more debt, inflated food/energy prices, and bailouts from policies that perpetuate #GrowthSlowing, that’s got a nasty short-term smell to it. It reeks of one of the darkest tragedies in US economic history - the inability of American leaders to learn, change, and evolve our policy making process.


Headline: “Romney/Ryan See Fed QE As Inflation Risk”


Really? C’mon now white boys – stop scaring the gold bugs. You may as well throw granny off her wheel chair while you are at it. There hasn’t been a Republican or Democrat ticket that has explained the relationship between a country’s currency and its People’s Purchasing Power since Margaret Thatcher taught us how to wear the conservative economic leadership pants.


Upward and onward with your centrally planned day…


The SP500 hasn’t gone up for 2 days, primarily because the US Dollar stopped going down for the last 2 days. China didn’t provide begged-for stimuli, Eurocrats are on vaca, and USA is about to have a real economic debate.


Is that Fair or Foul? And, for who?

  1. It’s foul for anything that’s highly correlated to what the US Dollar does in the immediate-term
  2. It’s fair for those of us who still believe in a free market’s ability to price all of our emotional baggage

Can the US stock market handle another 1% down day? How about another 10% draw-down like we saw from the March top to the June lows? All I can tell you is that yesterday’s -0.25% move “off the highs” felt like 1 ton of dog doo in a 10lb bag.


That’s what happens to a market that’s pinned up on short covering, has zero inflows, and is plainly hoping for another plan out of central casting. Once the shorts have all covered, short-term political tragedy is back in play.


If you don’t think Draghi, Rajoy, and Obama have some serious skin in the “but the market is up game” you are, at a bare minimum, unaware of what’s really going on backstage in this world’s political market theater. If you do, you’re probably like me – expecting the foulest of foul political moves to keep markets propped up.


“Fortune, on his damned quarrel smiling,

Showed like a rebel’s whore.”

-Captain, Act I, scene ii


In other news: 

  1. Chinese stocks dropped another -1.1% overnight and are down -2% for the wk as growth continues to slow
  2. Spanish stocks are down this morning after making lower-highs versus their August 7-8 short squeeze top
  3. Russian stocks are down -1.3% this morning as Oil struggles to make new highs (US Dollar up)
  4. CRB Commodities Index failed to overcome long-term TAIL risk resistance (307)
  5. Dr. Copper continues to be a card carrying Chinese growth slowing party member (Bearish Formation)
  6. US Treasury Bond Yields are debating the growth bulls as to whether or not this time is really different

For central planners attempting to “smooth” economic gravity, to grow, or not to grow – remains the question.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar, EUR/USD, Russell2000, and SP500 are now $1597-1611, $110.98-115.33, $81.88-82.98, $1.22-1.24, 791-803, and 1396-1406, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Fair or Foul? - Chart of the Day


Fair or Foul? - Virtual Portfolio

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.47%
  • SHORT SIGNALS 78.71%


The Macau Metro Monitor, August 29, 2012




Universal Entertainment said that it is seeking damages for harm caused to its share price and business due to Wynn's decision to remove Okada as a board member and reclaim the $2.77 billion of shares in the company owned by Universal Entertainment.  The lawsuit filed in Tokyo this week is demanding 11 billion yen ($140 million) in damages.  



Permira Advisers has sold 278.8 million shares at HK$21 (US$2.7) each, which represented 6.7% of the share capital of Galaxy Entertainment and close to 53% of Permira’s stake.  The source added that the shares were sold to a small number of investors, including existing Galaxy Entertainment shareholders and new investors, as well as long-only funds and hedge funds.  The deal raised an estimated HK$5.85 billion.

Weak Dollar Crowd

“The fact that this policy failed spectacularly in 1973 did not deter the weak-dollar crowd.”

-Jim Rickards


If my sell-side competition thinks I am going to back down on how Dollar Debauchery has perpetuated the US and Global Economic slowdown via commodity inflation in 2012, they better think again.


The Weak Dollar Crowd’s case for “strong exports” and an “up market” (on no volume or fund flows) is weakening. The Strong Dollar, Strong America solution I introduced in December 2011 (when I was bullish on US growth and stocks) is strengthening.


Make no mistake, I am at war with the Keynesians – it’s what Jim Rickards has coined the Currency War, “The Making of The Next Global Crisis.” Jim will be doing a conference call with our Global Macro Team today at 11AM EST (email for access).


Back to the Global Macro Grind


With a Navajo chant, shots were fired from New Haven on August 16th, 2012. That’s when we said sell stocks and buy bonds. If the Weak Dollar Crowd bought stocks at 1426 SPX and sold bonds with the 10yr US Treasury yield at 1.89%, they should feel shame.


But they don’t. In fact, some of these strategists and economists from the Old Wall are shameless. That’s not being rude – that’s the truth. How else should I describe their March 2012 consensus US and Global GDP estimates being off by 45-70%?


Oh, but “stocks are up” for the YTD, so you don’t have to get anything fundamental right about growth or how money printing infects it to take a half-baked victory lap in this business at short-term tops, right?


That’s ending folks. The People don’t trust broken sources. Market volumes speak louder than their words.


Got data to support the Weak Dollar Crowd weakening?

  1. GROWTH: this morning you’ll get Q2 2012 US GDP growth reported down at least 60% from where it was in Q4 2011 (4.10%)
  2. INFLATION: real-time inflation that drives down real (inflation adjusted) Consumption Growth is ripping, sequentially, in August
  3. CONFIDENCE: yesterday’s US Consumer Confidence number for August was down -8% month-over-month vs July’s 65.9 reading

That’s right “stocks are up” fans, the US stock market is up over +2% for August… and the American People don’t care. That’s because of the math – when Growth Slows and Inflation Accelerates, real consumers get squeezed.


Pardon? What happened? Why didn’t people forget about needing to be up +13% (from here in the SP500) to get their 401k super stock market allocations back to break-even? Didn’t they make a 100% equity allocation to the AAPL ETF?


This isn’t funny anymore. Neither were the 1970s.


In the 1970s you had a less politicized version of Ben Bernanke (Fed Chief Arthur Burns, who didn’t do the TV and print thing) work towards Dollar Debauchery and Debt Monetization under both a Republican and Democrat boss (Nixon and Carter).


Today, it’s worse – and not because Bernanke did the same for Bush/Obama – more so because the Europeans have their own currency this time and are trying to do precisely what the Japanese did.


Overlay those conflicted and compromised political policy “plans” driving the Dollar, Yen, and Euro with what #BailoutBeggars are asking the Chinese to do next (“PRINT LOTS OF MONEY” – Paul Krugman to Japan 1997), and the weakness of the weak is looking weaker.


It’s not different this time. Currency Wars have always been global. Rickards will expand on that with us today.


In other news this morning:

  1. Chinese stocks fell another -1% last night, right back down to their YTD lows (-16.5% since May)
  2. Indian and Indonesian stocks both snapped their immediate-term TRADE lines of support, down -0.6% and -1.4%, respectively
  3. EuroStoxx50 finally broke its immediate-term TRADE (squeeze) line of 2466
  4. Germany’s DAX and Spain’s IBEX sliced through their respective TRADE lines of 7016 and 7416 as well
  5. Russian stocks lead decliners, down -1% this morning (down -19% from the March #GrowthSlowing top), with Oil down
  6. Spain’s 5yr CDS just peeked its head back over the 500 line (1st time since August 13th)
  7. Gold failed at its long-term TAIL risk line of 1679 resistance, again, and continues to make lower-highs
  8. 10yr US Treasury Yields have effectively collapsed (-14% in less than 2wks) back down to 1.62%
  9. US Treasury Yield Spread (10yr – 2yr) is down 18bps since our call on August 16th to buy bonds (that’s a lot)
  10. Draghi wrote an Op-Ed about something I can’t understand

This globally interconnected gong show of central planning rumors still looks Too Big To Bail to me. Weak (failed) policy makers are looking weaker. Strong real-time risk management processes are getting stronger.


My immediate-term risk ranges for Gold, Oil (Brent), US Dollar Index, EUR/USD, 10yr UST yield, and the SP500 are now $1, $111.54-113.98, $81.11-81.96, $1.24-1.26, 1.58-1.65%, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Weak Dollar Crowd - Chart of the Day


Weak Dollar Crowd - Virtual Portfolio

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